Medicare is in the middle of its most significant stretch of changes in years, driven largely by the Inflation Reduction Act and new CMS rules taking effect in 2025 and 2026. The biggest headline: a new $2,000 annual cap on out-of-pocket prescription drug costs, the first time Medicare has placed a hard limit on what enrollees pay at the pharmacy. But that’s only one piece. Drug price negotiations, new payment options, expanded mental health access, telehealth extensions, and updated premiums are all reshaping the program right now.
The $2,000 Prescription Drug Cap
Starting in 2025, no one with a Medicare Part D drug plan will pay more than $2,000 out of pocket for covered prescriptions in a calendar year. Before this change, there was no hard ceiling. People taking expensive medications for cancer, autoimmune conditions, or rare diseases could face costs of $10,000 or more annually. The cap applies regardless of whether you have a standalone Part D plan or get drug coverage through a Medicare Advantage plan.
Alongside the cap, Medicare now offers a new payment smoothing option called the Medicare Prescription Payment Plan. Instead of paying large amounts upfront when you fill an expensive prescription early in the year, you can spread your out-of-pocket costs into smaller monthly installments across the full calendar year. All Part D plans are required to offer this option, participation is voluntary, and there’s no fee to use it. It doesn’t lower your total costs, but it prevents the sticker shock of a $600 or $1,200 pharmacy bill in January. You sign up by contacting your drug plan directly.
Medicare Is Negotiating Drug Prices for the First Time
For decades, Medicare was prohibited by law from negotiating the prices it pays for prescription drugs. That changed under the Inflation Reduction Act, and the first round of negotiated prices takes effect January 1, 2026. The ten drugs selected for this initial cycle are among the most widely used and expensive in the program:
- Eliquis and Xarelto, blood thinners used by millions of people with atrial fibrillation or blood clot risk
- Entresto, a heart failure medication
- Jardiance and Farxiga, used for type 2 diabetes and heart failure
- Januvia, another type 2 diabetes drug
- NovoLog and Fiasp, rapid-acting insulins
- Enbrel, used for rheumatoid arthritis and other autoimmune conditions
- Stelara, used for Crohn’s disease, psoriasis, and other inflammatory conditions
- Imbruvica, a cancer treatment for blood cancers like leukemia and lymphoma
The negotiated prices will replace the current prices Medicare pays for these drugs. Additional rounds of negotiations will add more drugs in future years. For enrollees taking any of these medications, the combination of lower negotiated prices and the $2,000 cap could substantially reduce what they pay.
Part B Premiums and Deductibles in 2025
The standard monthly premium for Medicare Part B rose to $185.00 in 2025, up $10.30 from $174.70 the year before. The annual Part B deductible increased to $257, up $17 from $240. These increases are modest by historical standards but still add up. Higher-income enrollees pay more than the standard premium based on their tax returns from two years prior.
Medicare Advantage Plan Changes
More than half of all Medicare beneficiaries are now enrolled in Medicare Advantage plans, the private-plan alternative to original Medicare. For 2025, the average monthly premium for MA plans actually dropped slightly, from $18.23 to $17.00. Supplemental benefits like dental, vision, and hearing coverage remain stable, with a slight increase in the rebate dollars plans can use to fund those extras.
This matters because original Medicare still does not cover most routine dental care, vision exams, eyeglasses, or hearing aids. If you’re on original Medicare, you won’t get coverage for cleanings, fillings, eye exams, or hearing aids unless you buy separate supplemental insurance. Medicare Advantage plans frequently include these benefits, though the specifics vary widely by plan. Some cover only preventive dental (exams, cleanings, X-rays) while others extend to fillings and extractions. Vision benefits typically include an annual eye exam and an allowance toward glasses. Hearing benefits can cover exams and hearing aids, but the dollar amounts differ.
Expanded Mental Health Access
One of the most practical changes for enrollees happened when Medicare opened its doors to two new categories of mental health professionals. Marriage and family therapists and mental health counselors, including addiction and substance abuse counselors who meet the requirements, can now enroll as Medicare providers and bill the program directly. This added more than 400,000 licensed professionals to the pool of providers available to people with Medicare.
Before this change, Medicare only covered mental health services from psychiatrists, psychologists, clinical social workers, and certain other practitioners. The expansion is significant because many parts of the country, particularly rural areas, have few psychiatrists or psychologists but do have licensed counselors and family therapists. If you’ve struggled to find a therapist who accepts Medicare, there are now far more options.
Telehealth Flexibilities Extended Through 2027
The telehealth expansions that began during the pandemic have been extended through December 31, 2027. This means Medicare patients can continue receiving non-behavioral health telehealth services from home, with no geographic restrictions on where you live. For behavioral and mental health telehealth, the geographic restrictions have been removed permanently, so you can see a therapist or psychiatrist via video regardless of whether you live in a rural or urban area.
This is particularly relevant alongside the mental health provider expansion. The combination of 400,000 new eligible providers and permanent telehealth flexibility for mental health means someone in a remote area could now see a licensed counselor over video and have Medicare cover the visit.
New Enrollment Flexibility for Dual-Eligible Beneficiaries
People who qualify for both Medicare and Medicaid, roughly 12 million Americans, got new enrollment options starting in 2025. Previously, these “dual-eligible” individuals could change plans quarterly. Now they can make changes once per month, giving them more flexibility to switch to a standalone prescription drug plan or move into original Medicare if their current plan isn’t working.
A separate new enrollment period allows full-benefit dual-eligible individuals to enroll in integrated special needs plans that coordinate their Medicare and Medicaid benefits together. These integrated plans are designed to reduce the confusion of managing two separate programs, combining medical, behavioral health, prescription drug, and long-term care benefits under one plan.
Long-Term Solvency Concerns
Behind these benefit improvements, Medicare’s financial picture remains a concern. The 2024 Trustees Report projects that the Hospital Insurance Trust Fund, which pays for Part A (hospital stays, skilled nursing, hospice), will be able to cover 100 percent of scheduled benefits until 2036. That’s five years later than the previous year’s estimate, an improvement driven partly by stronger-than-expected payroll tax revenue. But if Congress takes no action by 2036, the trust fund would only be able to pay 89 percent of scheduled hospital benefits from ongoing revenue.
This doesn’t mean Medicare would disappear. Payroll taxes and other revenue would still fund the vast majority of benefits. But the gap would need to be closed through some combination of increased funding, benefit adjustments, or cost reductions. Part B and Part D operate differently and don’t face the same trust fund depletion issue, since they’re funded through a combination of premiums and general tax revenue that adjusts annually.